Q: Is there an economic benefit to charging local sales taxes on all Internet transactions?

Panel's answer: Yes 6 No 2

Most proposals to raise or enforce the collection of taxes typically inform the taxpayer of the purpose or benefit that the tax revenue will provide. Not much discussion about how out of state taxpayers benefit from forcing online merchants to collect sales taxes for America's estimated 9,600 state and local taxing authorities. The internet is a new technology that has exponentially increased the level of retail competition, forcing a new wave of creative-destruction based on individual consumer awareness of prices. In this global economy, local governments may initially be successful, only to lose sales to foreign merchants in the end.

Yes
61% (291)

No
39% (184)

Compelling businesses to collect sales taxes for states where they do not have a physical presence would abolish the bedrock American principle of “no taxation without representation”. Particularly detrimental to smaller businesses, it would institutionalize competitive advantages for larger businesses having more resources to navigate the myriad sales taxes among all 50 states and nearly 10,000 local jurisdictions. The result will be ever higher sales taxes being implemented without accountability, representation, or benefit to the seller. Businesses should only collect sales taxes on behalf of state and municipalities where they are located, no matter where the customer happens to be.

It would level the playing field between the traditional brick-and-mortar retailers and the online ones. That would help in terms of employment for traditional retailers and also in terms of commercial real estate involving retailing. The other area where it would help would be in the fiscal difficulties being faced by state and local governments. Sales tax revenue goes to state and local governments as opposed to the federal government, and the rise of online retailing has negatively impacted the fiscal condition of those governments. Any negative impact on consumers will likely impact those at the higher end of the income distribution.

If when you buy a shirt at the local store you pay a sales tax, but when you buy the same shirt on the internet you do not, the effect is to discourage shopping from local stores. I don’t think you can make a coherent argument for why we’d want to do that. The financial stresses on “brick and mortar” retailing have put a lot of people out of work and forced many businesses to give up. Our tax policies should not be trying to accelerate that.

On two levels: it means more taxes are being collected, thus raising revenues that are currently escaping the state treasuries; but it also puts bricks and mortar on a more even competitive playing field, at least for now. The problem is that this will probably backfire on the bricks and mortars: at the moment the major competitive advantage for bricks and mortar is over-the-counter purchases so consumers do not have to wait. But with the requirement that Internet-based retailers collect the sales tax, the major incentive for them not to own property in California goes away, so internet retailers might as well locate their storage facilities here, thus nullifying that competitive advantage. Look for Amazon and others to do that soon in California, because they have already agreed to collect California sales taxes.